Recently, the results of an investigation into the effectiveness of the 30% facility were published in an evaluation report. Based on this report, it turns out the facility has accomplished most of its intended effects. However, there is still room for improvement. As you may know, the 30% facility is a specific tax regime for foreign employees that meet certain criteria, and who are temporarily assigned to, or hired from abroad by, an employer in the Netherlands. When meeting certain requirements, 30% of the employee's salary can be paid out as a tax-free allowance to cover extraterritorial costs. In addition, the employee may, at his/her request, benefit from a tax treatment as a nonresident taxpayer regarding income from a substantial interest and income from savings and investments. The investigation resulted in the following conclusions, among others:
• The 30% facility has proven to be effective on all fronts. The facility reduces the administrative burden and helps attract employees with scarce specific expertise to come to the Netherlands. In addition, the Netherlands has become increasingly attractive for foreign companies.
• The 30% tax-free allowance for extraterritorial expenses is not entirely sufficient for those employees earning a low income or coming from less prosperous countries. While for high-earners coming from prosperous countries, the fixed tax-free allowance of 30% is too high.
• Although the 30% facility has been found to be both effective and efficient, several suggestions were included in the report to make the facility more effective. A reduction of the duration of the facility from eight years to five or six years, an increase of the 150 kilometer-limit and a reduction of the fixed sum for income in excess of EUR 100,000 have all been suggested.
Although the report and the future of the 30% facility will only be discussed in parliament, it is important to be aware that the 30% facility might be changed in the future and to keep this in mind when concluding employment agreements with new employees from abroad.